Carbon Tax Blamed For Liberals' Defeat In Canadian Poll

by Mike Godfrey, Tax-News.com, Washington

15 October 2008

It is thought that the Canadian Liberal Party's flagship carbon tax policy was largely to blame for its poor showing at the polls during Tuesday's general election, which saw Conservative leader Stephen Harper elected to a second term as Prime Minister.

Early indications show that the Conservatives increased their number of seats in the House of Commons to 144 from 127, but have still fallen short of the 155 seats needed to form a majority in the 308-seat chamber, meaning that the government will still be, to a certain extent, reliant on the opposition to pass legislation.

However, while the result wasn't perhaps the resounding victory that the Conservatives had hoped for, it was a devastating defeat for the Liberal Party, which polled its lowest share of the overall vote in its electoral history and gained only 77 seats, down from 95. The result was also an indictment of its economic plans, and particularly those on tax, which it placed prominently in its election manifesto, and critics of Liberal leader Stephane Dion's much-touted 'Green Shift' policy seized upon the result as evidence that taxpayers at large consider green taxes an ineffective means of combating pollution and climate change. However, the result might also reflect the fact that taxpayers are seeking a measure of certainly in these volatile economic times. Certainly this was a point that Harper was keen to drive home on the eve of the election.

"Dion's pre-occupation (because we know he can’t set priorities) will be to run his risky carbon tax experiment - an experiment that will destroy jobs and drive up the price of everything," he warned the electorate on Monday.

"If you want a Prime Minister who will experiment with the Canadian economy, then give Mr. Dion a mandate to impose his carbon tax," he added.

The basic premise of the Liberals' Green Shift plan was that taxes would be imposed on greenhouse gas emissions associated with fossil fuels and the revenues generated from these new levies used to lower other taxes. These extra revenues would have also allowed for the creation of new incentives in the existing tax system, such as accelerated depreciation, for industry to invest in more environmentally friendly and fuel-efficient equipment.

The Liberals also promised to cut a number of other taxes, including corporate and individual income tax, and introduce an array of new tax credits to benefit businesses and families. However, the electorate was clearly not impressed enough by these pledges to vote Dion into power.

By contrast, Harper stuck to a more cautious game plan, emphasising the Conservatives' sound economic and fiscal management through two turbulent years for the global economy, a strategy which has evidently paid dividends. His only major tax proposal in the run up to the election was the distinctly un-green pledge to halve the rate of tax on diesel to curb soaring fuel costs in the transportation sector, which are ultimately passed on to the consumer through higher prices at the cash register.

While the Liberals' carbon tax plan was effectively endorsed by 250 of Canada's leading economists and academics in the run-up to the election, unfortunately for Dion, it is the taxpaying millions, not a few score of academics, that decide who will govern.

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